How To Invest In Stocks: Patience Is Rewarded
It is hard to go on the Internet these days without seeing an ad offering exclusive advice for making it big on the stock market, or to enter a bookstore without seeing several books on investing for beginners. Infomercials promise fast, easy profits and easy-to-learn systems. But in reality, the only teacher of these lessons is the stock market itself, and learning how to invest in stock is a process that can take years.
In order to learn investing, one must learn spot trends. Every market has its winning sectors and every sector has winning stocks. These stocks seem to outperform their peers, and the whole market. Taking a position in any of these high performers at the correct time before they make a large move to the upside is the key to knowing how to invest in stocks.
If the price of oil is rising steadily, certain stocks in the oil sector are likely to gain momentum while others perform in line with the sector, and a few underperform the sector. Picking the ones that outperform in a hot sector requires careful planning, patience and a bit of luck. In the end these big winners become the momentum stocks that fund managers and investors all want to own.
Even a very aggressive strategy will take weeks, more likely months, to turn a significant profit. Patience is essential to making money. Some investors keep some stocks for longer periods of time, and trade more actively in other parts of their portfolios. To be a true investor, one must be able to jump on an opportunity, avoid marginal opportunities when nothing else seems attractive, and sell off losers that are obviously not going to snap back.
When inevsting over the short run, timing is paramount. Good timing can turn a mediocre stock into a winner for your portfolio; bad timing can make a loser of a great company. While luck is an unavoidable factor in timing, a true winner is likely to continue rising because investors recognize its quality and value. They will ride out dips in the stock price in the knowledge that the stock will come back stronger than before, and buy more shares to take advantage of the stock's future gains.
In today's bull market, one needs only to read the financial sector of the paper or browse financial websites to find out which sectors are hot and which may become hot in the near future. Learning how to invest in stocks in order to pick winners from these sectors takes a little homework, patience and luck. But anyone with an inquiring mind can do it.
Published August 22nd, 2007
Filed in Business




